You Will Only Hate Comcast More if This Merger Goes Through

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Cable Giant Comcast To Acquire Time Warner Cable
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The already slim number of cable television providers continues to thin out. Charter Communications (CHTR) announced Tuesday that it will be acquiring the smaller Bright House Networks in a $10.4 billion deal that will combine Charter's 4.16 million video customers with the roughly 2 million homes that Bright House is presently servicing.

The deal shouldn't have a problem clearing regulatory hurdles. Bright House is a small player, operating primarily through Central Florida with a slight presence in four other states. Charter is the country's fourth-largest cable provider, and snapping up the sixth-largest player in Bright House will only find the combined company in a tight race with privately held Cox Communications and its roughly 6 million accounts for a distant third place.

The wedding snapshot isn't as pretty at the other end of the cable television market. Comcast (CMCSK) (CMCSA) and Time Warner Cable (TWC) are trying to hook up, and there's more than just a little public and regulatory resistance to the pairing up of the country's two largest providers. That deal isn't a lock to go through, and just a few days ago we had Comcast announcing that the original early 2015 closing date for the merger is being pushed back to the middle of 2015.

The market is clanging silverware against champagne glasses as it toasts the proposed pairing of Charter and Bright House, but there too many people waiting to shout "I object" at the top of their lungs as Comcast and Time Warner Cable try to tie the knot.

Big Deal Means Big Problems

It's now been more than a year since Comcast announced that it would be joining forces with Time Warner Cable. The proposed pairing drew groans from the beginning. Unlike Tuesday's Charter-Bright House match, which would create a cable provider servicing a little more than 6 million customers, Comcast's 22.4 million video accounts and Time Warner Cable's 10.8 million cable TV homes would create an even bigger juggernaut.

Comcast promised to address competitive concerns by divesting 3 million of the combined company's managed subscribers, but that would still create a monster with more than 30 million cable television accounts. It also leaves us to question how the transaction would inconvenience the 3 million customers that would be handed over to a smaller provider.

Comcast tried to promote the benefits of the combination for residential consumers, corporate accounts, and advertisers. It points to the deployment and development of advance services possible with a larger footprint, also singling out how Time Warner Cable customers would benefit from Comcast's speedy broadband, enterprise offerings and marketing tools. The public wasn't buying it. All that many people see is the biggest cable television provider getting bigger, and the cable bills that seem to get fatter with every passing year widening even faster.

It's not a surprise that the FCC hasn't given the deal the green light despite the deal being announced nearly 14 months ago.

You Already Hated Cable Television Providers

The market rewards success, and Comcast and Time Warner Cable have certainly been successful. However, it doesn't help that folks generally don't like their cable companies. Comcast won top honors in Consumerist's annual Worst Company in America poll last year. Time Warner Cable made it all the way to the Elite Eight, getting bumped out of being in the Final Four by the notorious Monsanto (MON).

Between the outages and escalating monthly ransoms, it's hard for Comcast and to a lesser extent Time Warner Cable to make friends. If they combine, forming a cable giant that will be five times larger than its nearest cable television rival -- whether that is Cox or Charter-Bright House at 6 million apiece -- the buckets of venom will overfill.

Comcast can point to satellite television and the cord-cutters eating away at its empire. Comcast itself has posted sequential declines in subscribers for 28 of the past 31 quarters, and the four largest publicly traded cable television companies combined to lose 751,000 net video customers in 2014.
However, trying to buy its way out of organic declines instead of tackling the value propositions and service setbacks that have resulted in the migration away from cable television isn't the answer. Getting better -- not bigger -- is what will give Comcast a shot at restoring its brand image.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.​​
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